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A Tip of the Hat to TIPS
For conservative investors, inflation-protected Treasurys are a low-risk way to reap some decent returns.
 
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Posted 2:08 PM EST January 29, 2008
Posted by: altarcia
I wonder if you can comment on the TIP ETF. Seemed easier to buy at $108 usd a share. Also, TIP is optionable and TIP options seemed very cheap (implied volatility for options 8 months ahead at 1.8%). If inflation goes up, so does the TIP ETF; but what happens to the TIP ETF if the Fed lowers or raises interest rates? I guess it appreciates in the short-run as interest rates fall and the ETF exiting holdings appreciate, but it could depreciate in the long-run as the ETF renews its bonds with lower yields, ceteris paribus, ie keeping inflation rate unchanged. Thanks! Al Tarcia
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